INTERNATIONAL BUSINESS MACHINES CORP
For the period ended Jun 30, 2025. Filed Jul 24, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 24, 2025
IBM$245.00-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-24.
0000051143-25-000032
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial ConditionCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-24.
0000051143-25-000052
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial ConditionThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 181 previous paragraphs and 231 current paragraphs.
86 unchanged; 70 reworded; 64 added; 24 removed; 1 previous and 11 current paragraphs rearranged.
Tables are not compared: 30 previous and 51 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (64)
Current report
(1)Year-to-year revenue growth of 5.3 percent adjusted for currency.
Current report
The strength of our portfolio and the resiliency of our business model underpinned by our hybrid cloud and AI strategy position us well to deliver sustainable and profitable growth. While the current economic and trade environment remains dynamic, we expect technology to continue contributing to overall economic growth and serve as a key source of competitive advantage allowing businesses to scale, drive efficiencies, and fuel growth. This was reflected in our performance in the second quarter. Our disciplined strategy and durable business model enable us to create long-term value for our partners and clients.
Current report
Total revenue grew 7.7 percent as reported and 5.3 percent adjusted for currency compared to the prior-year period, led by Software and Infrastructure. Software delivered revenue growth of 9.6 percent as reported and 7.6 percent adjusted for currency, with solid growth in Hybrid Cloud, Automation and Data, reflecting continued growth in our high-value annual recurring revenue base. Consulting revenue increased 2.6 percent as reported and was flat adjusted for currency, as the business continued to stabilize through the second quarter of 2025. Infrastructure revenue increased 13.6 percent year to year as reported and 11.5 percent adjusted for currency, reflecting early strength in our new IBM Z platform.
Current report
Total expense and other (income) increased 9.6 percent in the second quarter of 2025 compared to the second quarter of 2024 driven by higher operating acquisition-related spending and the effects of currency. Total operating (non-GAAP) expense and other (income) increased 10.7 percent year to year, driven primarily by the same factors.
Current report
Pre-tax income from continuing operations of $2.6 billion increased 17.0 percent and pre-tax margin was 15.3 percent, an increase of 1.2 points compared to the second quarter of 2024. Performance this quarter benefited from our gross margin expansion and productivity actions taken to transform our operations; partially offset by our continued investments to drive innovation. The continuing operations provision for income taxes was $0.4 billion in both the second quarter of 2025 and the second quarter of 2024. Net income from continuing operations of $2.2 billion increased 19.8 percent and the net income from continuing operations margin was 12.9 percent, an increase of 1.3 points year to year.
Current report
Cash provided by operating activities was $1.7 billion in the second quarter of 2025, a decrease of $0.4 billion compared to the second quarter of 2024 which includes an increase in cash used by financing receivables of $0.5 billion. Free cash flow was $2.8 billion, an increase of $0.2 billion versus the prior-year period. Net cash provided by investing activities of $1.7 billion decreased $0.5 billion and net cash used in financing activities of $2.9 billion decreased $1.7 billion compared to the second quarter of 2024.
Current report
Financial Results Summary — Six Months Ended June 30:
Current report
(1)Year-to-year revenue growth of 3.9 percent adjusted for currency.
Current report
Financial Performance Summary —Six Months Ended June 30:
Current report
In the first six months of 2025, we reported $31.5 billion in revenue, net income from continuing operations of $3.2 billion, and operating (non-GAAP) earnings of $4.2 billion. Diluted earnings per share from continuing operations was $3.43 as reported and $4.40 on an operating (non-GAAP) basis. We generated $6.1 billion in cash from operations and $4.8 billion in free cash flow, and delivered shareholder returns of $3.1 billion in dividends. Our year-to-date performance reflects our deep focus on the business fundamentals with continued revenue growth, gross profit margin expansion and strong cash generation, and a balance sheet with financial flexibility to support our business.
Current report
Total revenue grew 4.3 percent as reported and 3.9 percent adjusted for currency compared to the prior-year period. Software delivered revenue growth of 8.6 percent as reported and 8.3 percent adjusted for currency, led by strength in our portfolio, innovation we have brought to our organic software, and contribution from the acquisitions we have made over the past twelve months. Consulting revenue was flat as reported and adjusted for currency, impacted by the current dynamic environment and client focus on discretionary spending. Infrastructure revenue increased 4.6 percent as reported and 4.3 percent adjusted for currency, reflecting product cycle dynamics, with strong growth in Hybrid Infrastructure from the newly released IBM z17, partially offset by a decline in Distributed Infrastructure, and a decrease in Infrastructure Support.
Current report
From a geographic perspective, Americas revenue increased 2.6 percent year to year as reported (3.4 percent adjusted for currency). EMEA increased 10.3 percent (8.1 percent adjusted for currency). Asia Pacific decreased 0.6 percent (1.4 percent adjusted for currency).
Current report
Gross margin of 57.1 percent increased 1.9 points year to year with gross profit margin expansion driven by our improving portfolio mix and productivity actions. Operating (non-GAAP) gross margin of 58.5 percent increased 2.1 points compared to the prior-year period due to the same dynamics.
Current report
Total expense and other (income) increased 6.4 percent in the first six months of 2025 versus the prior-year period primarily driven by higher operating acquisition-related spend and the prior-year gain on the divestiture of The Weather Company assets. Total operating (non-GAAP) expense and other (income) increased 7.3 percent year to year, driven primarily by the factors described above.
Current report
Operating (non-GAAP) pre-tax income from continuing operations of$4.9 billion increased 10.9 percent compared to the prior-year period and the operating (non-GAAP) pre-tax margin from continuing operations increased 0.9 points to 15.7 percent primarily driven by the same dynamics as described above. The operating (non-GAAP) provision for income taxes in the first six months of 2025 was $0.8 billion, compared to $0.6 billion in the first six months of 2024. The operating (non-GAAP) income tax provision year-to-year change was primarily driven by the same factor described above. Operating (non-GAAP) income from continuing operations of$4.2 billion increased 8.6 percent and the operating (non-GAAP) income margin from continuing operations of 13.2 percent increased 0.5 points year to year.
Current report
Diluted earnings per share from continuing operations was$3.43 for the six months ended June 30, 2025, a decrease of 6.0 percent compared to the prior-year period. Operating (non-GAAP) diluted earningsper share of$4.40 increased 7.1 percent compared to the prior-year period.
Current report
Second Quarter in Review
Current report
(1)Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the new z17 launch in June 2025. Refer to note A, "Significant Accounting Policies," in the company's 2024 Annual Report for additional information.
Current report
(1)Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the new z17 launch in June 2025. Refer to note A, "Significant Accounting Policies," in the company's 2024 Annual Report for additional information.
Current report
Software revenue of $7,387 million increased 9.6 percent as reported (7.6 percent adjusted for currency) in the second quarter of 2025 compared to the prior-year period, with solid growth in Hybrid Cloud, Automation and Data. This revenue performance reflects our continued growth in our high-value, annual recurring revenue base.
Current report
Hybrid Cloud (Red Hat) year-to-year revenue growth accelerated in the second quarter compared to the first quarter, driven by another quarter of double-digit signings growth and demand for our hybrid cloud solutions. We gained market share across each of our key solutions, led by OpenShift which grew revenue more than 20 percent. Automation revenue grew 16.2 percent as reported (14.4 percent adjusted for currency), with HashiCorp contributing to growth with a strong first full quarter since the acquisition closed. In Data, revenue grew across the portfolio, with strength in our AI offerings. The revenue performance in Transaction Processing reflects where we are in the new z17 cycle as clients prioritized hardware spend at the beginning of a new program.
Current report
Revenue performance in the first six months of 2025 compared to the prior-year period was as follows:
Current report
Software revenue of $13,722 million increased 8.6 percent as reported (8.3 percent adjusted for currency) compared to the same period in 2024. Software represents approximately 45 percent of IBM's business and the performance in the first half of 2025 reflects the combination of the strength of our portfolio, innovation we have brought to our organic software, and contribution from acquisitions we have made during the past twelve months, including HashiCorp, StreamSets and webMethods. Our ability to deploy our AI assistants and agents as well as AI middleware in hybrid environments leveraging multi-model capabilities continues to resonate with clients.
Current report
Software gross profit margin increased 0.3 points to 83.9 percent in the second quarter of 2025 compared to the prior-year period. Segment profit of $2,296 million increased 8.7 percent and segment profit margin of 31.1 percent decreased 0.3 points compared to the prior-year period.
Current report
For the first six months of 2025, gross profit margin increased 0.7 points to 83.7 percent, compared to the first six months of 2024. Segment profit of $4,143 million increased 14.7 percent and segment profit margin of 30.2 percent increased 1.6 points compared to the prior-year period.
Current report
Software gross profit, segment profit and respective margin performance in the second quarter and the first six months of 2025 reflect the benefits from our continued productivity actions and investments in acquisitions.
Current report
Consulting revenue of $5,314 million increased 2.6 percent as reported and was flat adjusted for currency on a year-to-year basis, as the business continued to stabilize through the second quarter of 2025. Strategy and Technology increased 0.9 percent as reported (decreased 2.2 percent adjusted for currency) and Intelligent Operations revenue increased 4.8 percent as reported (2.0 percent adjusted for currency). The environment remains dynamic with clients prioritizing cost-efficient, high-impact technology investments, driving revenue growth in areas such as business application transformation, AI operations, and cloud platform engineering.
Current report
For the first six months of 2025, Consulting revenue of $10,382 million was flat as reported (declining 0.4 percent adjusted for currency), compared to the prior-year period, reflecting the current dynamic environment and client focus on discretionary spending. In the first half of 2025, we had strength in our Intelligent Operations offerings such as cloud platform engineering services and application management services, while we had declines in Strategy and Technology reflecting strong prior-year performance. Clients are recognizing the benefits of generative AI, which we have continued to see in our signings and backlog composition, and we are leveraging our AI offerings and growing our strategic partnerships to help clients drive operational efficiency and reduced costs.
Current report
For the first six months of 2025, Consulting gross profit margin of 27.4 percent increased 1.6 points compared to the prior-year period. Segment profit of $1,121 million increased 26.2 percent and segment profit margin of 10.8 percent increased 2.2 points in the first six months of 2025 compared to the prior-year period.
Current report
Consulting gross profit, segment profit and respective margin performance in the second quarter and the first six months of 2025 reflect the benefits of the productivity actions we have taken.
Current report
Infrastructure revenue of $4,142 million increased 13.6 percent as reported and 11.5 percent adjusted for currency in the second quarter of 2025 compared to the prior-year period, reflecting early strength in our new IBM Z program, z17, as AI use cases are resonating strongly with clients. IBM Z revenue increased 70.2 percent as reported and 67.1 percent adjusted for currency in the second quarter. The success of our z17 launch highlights the enduring nature of the IBM Z platform through the value of our continued innovation around AI workloads and hybrid cloud architecture. Distributed Infrastructure revenue decreased 15.1 percent as reported (16.9 percent adjusted for currency) with product cycle dynamics impacting Power. In July, we announced Power11, our next-generation platform featuring advancements across the processor, hardware architecture and virtualization software stack. While Storage was impacted by the new IBM Z cycle as clients prioritized hardware spend, our early strength in z17 and growth in installed capacity drives a long-term benefit.
Current report
For the first six months of 2025, Infrastructure revenue of $7,027 million increased 4.6 percent as reported (4.3 percent adjusted for currency) compared to the prior-year period, reflecting strong growth in Hybrid Infrastructure driven by z17, partially offset by the decline in Distributed Infrastructure, and a decrease in Infrastructure Support reflecting product cycle dynamics.
Current report
Infrastructure gross profit margin of 61.5 percent increased 5.0 points in the second quarter of 2025 compared to the prior-year period. Infrastructure segment profit of $965 million increased 47.6 percent and segment profit margin of 23.3 percent increased 5.4 points compared to the prior-year period.
Current report
For the first six months of 2025, gross profit margin of 57.9 percent increased 2.5 points compared to the prior-year period. Infrastructure segment profit of $1,213 million increased 25.7 percent and segment profit margin of 17.3 percent increased 2.9 points in the first six months of 2025 compared to the prior-year period.
Current report
Infrastructure gross profit margin expansion for the second quarter and first six months of 2025 were primarily driven by the launch of z17. Segment profit and profit margin performance for both periods were primarily driven by the gross profit margin expansion.
Current report
Americas revenue of $8,462 million increased 6.1 percent as reported and 6.5 percent adjusted for currency in the second quarter of 2025 compared to the prior-year period. The U.S. increased 4.5 percent year to year. Canada increased 27.8 percent as reported and 28.6 percent adjusted for currency. Latin America increased 1.4 percent as reported and 5.3 percent adjusted for currency, reflecting growth across most countries with a partial offsetting decline in Brazil of 6.1 percent as reported and 0.8 percent adjusted for currency.
Current report
In EMEA, total revenue of $5,413 million increased 14.6 percent as reported and 8.5 percent adjusted for currency. Germany, the UK, France, and Italy increased 30.9 percent, 23.7 percent, 15.4 percent and 9.1 percent, respectively, as reported, and 24.0 percent, 17.2 percent, 9.6 percent and 3.3 percent, respectively, adjusted for currency.
Current report
Asia Pacific revenue of $3,103 million increased 1.1 percent as reported, but decreased 2.7 percent adjusted for currency. Japan increased 4.3 percent as reported, but decreased 3.5 percent adjusted for currency. Australia and India increased 12.1 percent and 5.1 percent, respectively, as reported, and 15.0 percent and 7.9 percent, respectively, adjusted for currency. China decreased 21.5 percent as reported and 21.7 percent adjusted for currency.
Current report
Americas revenue of $15,668 million increased 2.6 percent as reported and 3.4 percent adjusted for currency. The U.S. increased 2.3 percent compared to the prior-year period. Canada increased 10.5 percent as reported and 13.6 percent adjusted for currency. Latin America was flat as reported, but grew 5.7 percent adjusted for currency. Within Latin America, Brazil decreased 5.9 percent as reported, but increased 2.3 percent adjusted for currency.
Current report
In EMEA, total revenue of $9,965 million increased 10.3 percent as reported and 8.1 percent adjusted for currency. The UK, Germany, France and Italy increased 17.2 percent, 14.5 percent, 9.4 percent and 8.0 percent, respectively, as reported, and 14.1 percent, 12.4 percent, 7.8 percent and 6.0 percent, respectively, adjusted for currency.
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Removed paragraphs (24)
Previous report
(1)Year-to-year revenue growth of 2.3 percent adjusted for currency.
Previous report
Our diversified business portfolio underpinned by Software, Consulting and Infrastructure creates value and drives growth. The economic uncertainties driven by the volatile trade environment have created disruptions in markets and complexities in supply chains. We have a long track record of operating globally and managing supply chain complexities. While no one is immune to uncertainty, we enter this period from a position of relative strength and resiliency having focused on accelerating our productivity initiatives and maintaining our strong balance sheet. These actions, combined with our diversification across geographies, industries and large enterprise clients position us well to navigate the current environment. In addition, the value of technology becomes even more critical during times of uncertainty because it allows businesses to maintain their competitive advantage by driving cost efficiencies and productivity, protecting their financial position, and fueling growth.
Previous report
Total revenue grew 0.6 percent as reported and 2 percent adjusted for currency compared to the prior-year period, led by Software. Software delivered revenue growth of 7.4 percent as reported and 9.0 percent adjusted for currency, with growth across all lines of business, reflecting demand for our focused portfolio that provides end-to-end hybrid cloud and AI capabilities. Consulting revenue decreased 2.3 percent as reported but was flat adjusted for currency, driven primarily by revenue declines in Strategy and Technology. Infrastructure revenue decreased 6.2 percent year to year as reported and 4.3 percent adjusted for currency, reflecting product cycle dynamics.
Previous report
First Quarter in Review
Previous report
(1)Recast to reflect January 2025 changes to the reported revenue categories.
Previous report
Software revenue of $6,336 million increased 7.4 percent as reported (9.0 percent adjusted for currency) in the first quarter of 2025 compared to the prior-year period, with growth in all lines of business. This performance reflects the demand for our focused portfolio that provides end-to-end hybrid cloud and AI capabilities. Our organic Software revenue contributed approximately 4 points of growth as reported (6 points adjusted for currency) with continued demand for our generative AI products including our AI assistants and agents and watsonx platform. This revenue performance continued to reflect growth in our high-value, recurring revenue base, which represents approximately 80 percent of our annual software revenue.
Previous report
Hybrid Cloud's (Red Hat) double-digit growth reflects strong growth in subscriptions and moderate growth in consumption-based services. OpenShift and Ansible gained market share, and along with RHEL each had double-digit growth. Automation grew revenue including contribution from our automation suite of products as clients proactively address cost, performance and resiliency within complex hybrid cloud native architectures. Data revenue grew as customers continue to prepare their data for generative AI, with rising demand for AI assistants and agents, increasing demand for our watsonx platform, and the need for data security. The revenue performance in Transaction Processing was driven by its solid base of recurring revenue and growth from our generative AI offerings for transaction processing. Clients remain committed to these products, underscoring the strategic importance of this mission-critical software.
Previous report
Software gross profit margin increased 1.2 points to 83.6 percent in the first quarter of 2025 compared to the prior-year period. Segment profit of $1,847 million increased 23.2 percent and segment profit margin of 29.1 percent increased 3.7 points compared to the prior-year period. Both segment gross profit and segment profit dollar growth and margin expansion reflect our operating leverage driven by our revenue performance and portfolio mix as well as the benefits from our continued productivity actions and innovations within the software portfolio.
Previous report
(1)Recast to reflect January 2025 changes to the reported revenue categories.
Previous report
Consulting revenue of $5,068 million decreased 2.3 percent as reported (0.5 percent adjusted for currency) in the first quarter of 2025 compared to the prior-year period. Within Consulting, Strategy and Technology provides strategy, process design, system implementation, and cloud architecture and implementation services. In the first quarter, Strategy and Technology had declines in strategy and process design, which are more discretionary in nature, partially offset by growth in technology consulting, and supply chain and business application transformations. Intelligent Operations delivers application, cloud platform, and operations services. The revenue performance this quarter within Intelligent Operations reflects a sequential improvement compared to the year-to-year performance in fourth-quarter 2024, as clients focus on the cost and productivity savings provided by our application management services.
Previous report
Infrastructure revenue of $2,886 million decreased 6.2 percent as reported and 4.3 percent adjusted for currency in the first quarter of 2025 compared to the prior-year period, reflecting the impact of product cycle dynamics in both Hybrid Infrastructure and Infrastructure Support. Hybrid Infrastructure revenue decreased primarily driven by IBM Z. This quarter represents the twelfth quarter of the z16 program, which continues to deliver strong performance in both total revenue and capacity over the life of the program. In April, we announced the launch of the IBM z17 which will be available in June, offering enhanced AI acceleration through multi-model AI capabilities, new security features to protect data, and tools that leverage AI for improving system usability. The z17 expands our value proposition to clients, including lower power requirements, larger capacity growth and increased performance over z16. Distributed Infrastructure revenue decreased reflecting product cycle dynamics that are impacting our Power business, while Storage had another quarter of double-digit growth as our latest innovations continue to address the increasing data demands of our clients. Infrastructure Support revenue decreased as reported, but grew adjusted for currency, as the business continues to stabilize.
Previous report
Infrastructure gross profit margin of 52.8 percent decreased 1.4 points in the first quarter of 2025 compared to the prior-year period, driven primarily by gross margin declines within Hybrid Infrastructure mainly due to mix resulting from product cycle dynamics. Infrastructure segment profit of $248 million decreased 20.3 percent and segment profit margin of 8.6 percent decreased 1.5 points compared to the prior-year period. The year-to-year decrease in segment profit and margin reflects the revenue decline due to product cycle dynamics and continued investments in innovation for our next generation of products, partially offset by the benefits from productivity actions and higher IP and custom development income year to year.
Previous report
Americas revenue of $7,206 million decreased 1.2 percent as reported, but was flat adjusted for currency in the first quarter of 2025 compared to the prior-year period. The U.S. was flat year to year. Canada decreased 7.1 percent as reported and 1.7 percent adjusted for currency. Latin America decreased 1.4 percent as reported, but increased 6.0 percent adjusted for currency, with Brazil decreasing 5.8 percent as reported, but increasing 5.4 percent adjusted for currency.
Previous report
In EMEA, total revenue of $4,552 million increased 5.6 percent as reported and 7.7 percent adjusted for currency. The UK, Italy, and France increased 10.7 percent, 6.7 percent and 3.1 percent, respectively, as reported, and 11.1 percent, 9.2 percent and 5.8 percent, respectively, adjusted for currency. Germany decreased 2.0 percent as reported, but increased 0.7 percent adjusted for currency.
Previous report
Asia Pacific revenue of $2,783 million decreased 2.4 percent as reported, but was flat adjusted for currency. Japan decreased 0.3 percent as reported, but increased 2.0 percent adjusted for currency. China decreased 26.8 percent as reported and 26.2 percent adjusted for currency. India and Australia decreased 1.5 percent and 1.3 percent, respectively, as reported, but increased 2.7 percent and 3.3 percent, respectively, adjusted for currency.
Previous report
•Higher acquisition-related charges and amortization of acquired intangible assets (2 points).
Previous report
Total other (income) and expense was income of $165 million in the first quarter of 2025 and decreased $152 million compared to the prior-year period. The year-to-year change was primarily driven by:
Previous report
Non-Financing debt of $53,262 million increased $10,405 million ($9,868 million adjusted for currency) from December 31, 2024, primarily due to the first-quarter debt issuances to increase our financial liquidity and plan for our future debt maturities; partially offset by maturities within the quarter.
Previous report
Total equity decreased $440 million from December 31, 2024, primarily driven by dividends paid of $1,549 million; partially offset by an increase from net income of $1,055 million.
Previous report
Net cash provided by operating activities increased $202 million as compared to the first three months of 2024. This was due to performance-related improvements within net income, and an increase in cash provided by financing receivables; partially offset by balance sheet dynamics. Changes in operating assets and liabilities, net of acquisitions/divestitures in the Consolidated Statement of Cash Flows also includes the reduction of tax reserves in the first quarter of 2024, which represents a non-cash adjustment to reconcile net income to cash from operating activities.
Previous report
Our performance this quarter reflects the continued success of our focused strategy around hybrid cloud and AI. For the last several years, we have been strengthening our portfolio and building on consistency in execution. Over the longer term, we are focused on delivering on our financial model presented at Investor Day earlier this year.
Previous report
There are areas of our portfolio that could see greater variability in the event that the macroeconomic environment deteriorates. This includes Consulting which is more sensitive to discretionary pullbacks and DOGE related initiatives, consumption-based services in Software, including in Red Hat, and areas of Distributed Infrastructure. As we look forward to the remainder of 2025, we expect to remain disciplined about managing our spending. The strength of our balance sheet and strong liquidity position allow us to make investments in our business for the long-term.
Previous report
For the three months ended March 31, 2025, financing revenue decreased 0.8 percent as reported, but increased 2.2 percent adjusted for currency compared to the prior-year period.
Previous report
Segment profit decreased 25.5 percent to $69 million and segment profit margin decreased (11.8) points to 35.8 percent, respectively, compared to the prior-year period driven primarily by higher unallocated credit loss reserve requirements in the current year which reflects current economic conditions.
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Previous wording
FOR THE THREE MONTHS ENDED MARCH 31, 2025
Current wording
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025
Previous wording
In an effort to provide better transparency into the operational results of the business, supplementally, management separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges and intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform), management characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to that charge as non-operating. Adjustments primarily include true-ups, accounting elections and any changes to regulations, laws or audit adjustments that affect the recorded one-time charge. For acquisitions, operating (non-GAAP) earnings exclude the amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. These charges are excluded as they may be inconsistent in amount and timing from period to period and are significantly impacted by the size, type and frequency of our acquisitions. Management also characterized as non-operating expense, given its unique and temporary nature, the mark-to-market impact on the foreign exchange derivative contracts entered into prior to the acquisition of StreamSets and webMethods from Software AG, beginning in December 2023, to economically hedge the foreign currency exposure related to the purchase price of this acquisition. These derivative contracts expired by June 28, 2024. This impact was recorded in other (income) and expense in the Consolidated Income Statement and reflected the changes in fair value of these derivative contracts. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, management characterizes certain items as operating and others as non-operating, consistent with GAAP. We include defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs include defined benefit plan and nonpension postretirement benefit plan amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. Non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance, and we consider these costs to b…
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Current wording
In an effort to provide better transparency into the operational results of the business, supplementally, management separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges and intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (TCJA or U.S. tax reform), management characterizes the one-time provisional charge recorded in the fourth quarter of 2017, and adjustments to that charge as non-operating. Adjustments include the tax effect of true-ups, audit adjustments, accounting elections and new regulations or laws that impact the TCJA provisions which resulted in the one-time provisional charge. For acquisitions, operating (non-GAAP) earnings exclude the amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. These charges are excluded as they may be inconsistent in amount and timing from period to period and are significantly impacted by the size, type and frequency of our acquisitions. Management also characterized as non-operating expense, given its unique and temporary nature, the impact on the foreign exchange derivative contracts entered into prior to the acquisition of StreamSets and webMethods from Software AG, beginning in December 2023, to economically hedge the foreign currency exposure related to the purchase price of this acquisition. These derivative contracts expired by June 28, 2024. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, management characterizes certain items as operating and others as non-operating, consistent with GAAP. We include defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs include defined benefit plan and nonpension postretirement benefit plan amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. Non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance, and we consider these costs to be outside of the operational performance of the business.
Previous wording
The following table provides the company’s operating (non-GAAP) earnings for the first quarter of 2025 and 2024.
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The following table provides the company’s operating (non-GAAP) earnings for the second quarter of 2025 and 2024.
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In the first three months of 2025, movements in global currencies continued to impact our reported year-to-year revenue and profit. We execute hedging programs which defer, but do not eliminate, the impact of currency. The (gains)/losses from these hedging programs are reflected primarily in other (income) and expense. Refer to “Currency Rate Fluctuations,” for additional information.
Current wording
In the first six months of 2025, movements in global currencies continued to impact our reported year-to-year revenue and profit. We execute hedging programs which defer, but do not eliminate, the impact of currency. The (gains)/losses from these hedging programs are reflected primarily in other (income) and expense. Refer to “Currency Rate Fluctuations,” for additional information.
Previous wording
In the first quarter of 2025, we reported $14.5 billion in revenue, income from continuing operations of $1.1 billion, and operating (non-GAAP) earnings of $1.5 billion. Diluted earnings per share from continuing operations was $1.12 as reported and $1.60 on an operating (non-GAAP) basis. We generated $4.4 billion in cash from operations and $2.0 billion in free cash flow. We invested $7.1 billion in acquisitions, driven primarily by the closing of the HashiCorp acquisition and delivered shareholder returns of $1.5 billion in dividends. Our first-quarter performance reflects the continued success of our hybrid cloud and AI strategy. With our focus on the fundamentals of our business, we continue to maintain a strong liquidity position and solid cash flow generation which enables us to invest in our business and return value to shareholders through dividends.
Current wording
In the second quarter of 2025, we reported $17.0 billion in revenue, income from continuing operations of $2.2 billion, and operating (non-GAAP) earnings of $2.7 billion. Diluted earnings per share from continuing operations was $2.31 as reported and $2.80 on an operating (non-GAAP) basis. We generated $1.7 billion in cash from operations and $2.8 billion in free cash flow, and delivered shareholder returns of $1.6 billion in dividends. Our second-quarter performance reflects the continued success of our hybrid cloud and AI strategy. With our focus on the fundamentals of our business, we continue to maintain a strong liquidity position and solid cash flow generation which enables us to invest in our business and return value to shareholders through dividends.
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From a geographic perspective, Americas revenue decreased 1.2 percent as reported but was flat adjusted for currency. Europe/Middle East/Africa (EMEA) increased 5.6 percent as reported (7.7 percent adjusted for currency). Asia Pacific decreased 2.4 percent as reported but was flat adjusted for currency.
Current wording
From a geographic perspective, Americas revenue increased 6.1 percent as reported (6.5 percent adjusted for currency). Europe/Middle East/Africa (EMEA) increased 14.6 percent as reported (8.5 percent adjusted for currency). Asia Pacific increased 1.1 percent as reported but declined 2.7 percent adjusted for currency.
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Gross margin of 55.2 percent increased 1.7 points year to year with margin expansion driven primarily by ongoing productivity initiatives and operating leverage. Operating (non-GAAP) gross margin of 56.6 percent increased 1.9 points compared to the prior-year period due to the same dynamics.
Current wording
Gross margin of 58.8 percent increased 2.0 points year to year with margin expansion driven primarily by portfolio mix and productivity actions. Operating (non-GAAP) gross margin of 60.1 percent increased 2.3 points compared to the prior-year period due to the same dynamics.
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Operating (non-GAAP) pre-tax income from continuing operations of $1.7 billion increased 4.9 percent compared to the first quarter of 2024 and the operating (non-GAAP) pre-tax margin from continuing operations increased 0.5 points to 12.0 percent primarily driven by our gross margin performance and the benefits from productivity; partially offset by continued investments in innovation. The operating (non-GAAP) provision for income taxes in the first quarter of 2025 was $0.2 billion, compared to $0.1 billion in the first quarter of 2024. Operating (non-GAAP) net income from continuing operations of $1.5 billion decreased 3.0 percent and the operating (non-GAAP) net income margin from continuing operations of 10.4 percent decreased 0.4 points year to year.
Current wording
Operating (non-GAAP) pre-tax income from continuing operations of $3.2 billion increased 14.5 percent compared to the second quarter of 2024 and the operating (non-GAAP) pre-tax margin from continuing operations increased 1.1 points to 18.8 percent driven by the same factors as described above. The operating (non-GAAP) provision for income taxes was $0.5 billion in both the second quarter of 2025 and the second quarter of 2024. Operating (non-GAAP) net income from continuing operations of $2.7 billion increased 16.6 percent and the operating (non-GAAP) net income margin from continuing operations of 15.6 percent increased 1.2 points year to year.
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Diluted earnings per share from continuing operations of $1.12 in the first quarter of 2025 decreased 33.7 percent compared to the prior-year period, and operating (non-GAAP) diluted earnings per share of $1.60 decreased 4.8 percent compared to the first quarter of 2024.
Current wording
Diluted earnings per share from continuing operations of $2.31 in the second quarter of 2025 increased 18.0 percent compared to the prior-year period, and operating (non-GAAP) diluted earnings per share of $2.80 increased 15.2 percent compared to the second quarter of 2024.
Previous wording
Pre-tax income from continuing operations of $1.2 billion increased 7.9 percent and pre-tax margin was 8.0 percent, an increase of 0.5 points compared to the first quarter of 2024. Performance this quarter benefited from our gross margin expansion and productivity actions taken to transform our enterprise operations; partially offset by our continued investments to drive innovation. Our year-to-year pre-tax income results were impacted by the gain from the divestiture of The Weather Company assets in the prior-year period, and lower workforce rebalancing charges in the current year, with a combined impact of $0.2 billion. The year-to-year divestiture dynamics and workforce rebalancing charges were a net hurt to our pre-tax income from continuing operations of approximately 14.6 points and pre-tax margin of approximately 1.3 points. The continuing operations provision for income taxes in the first quarter of 2025 was $0.1 billion, compared to a benefit from income taxes of $0.5 billion in the first quarter of 2024. The prior-year tax benefit was primarily driven by the resolution of certain tax audit matters. Net income from continuing operations of $1.1 billion decreased 33.1 percent and the net income from continuing operations margin was 7.3 percent, down 3.6 points year to year.
Current wording
Pre-tax income from continuing operations of $3.8 billion increased 14.0 percent and pre-tax margin was 11.9 percent, an increase of 1.0 points as compared to the first six months of 2024. Performance in the first six months of 2025 benefited from our gross margin expansion and productivity actions taken to transform our operations; partially offset by our continued investments to drive innovation. Our year-to-year pre-tax income results were also impacted by the gain from the divestiture of The Weather Company assets in the prior-year period. The continuing operations provision for income taxes for the first six months of 2025 was $0.5 billion, compared to a benefit from income taxes of $0.1 billion for the first six months of 2024. The benefit from income taxes in the first six months of 2024 was primarily driven by the resolution of certain tax audit matters in the first quarter. Net income from continuing operations of $3.2 billion decreased 4.6 percent and the net income from continuing operations margin was 10.3 percent, down 1.0 points year to year.
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At March 31, 2025, the balance sheet remained strong with financial flexibility to support and invest in the business. Cash and cash equivalents, restricted cash and marketable securities at March 31, 2025 of $17.6 billion increased $2.8 billion from December 31, 2024 and debt of $63.3 billion at March 31, 2025 increased $8.3 billion, primarily driven by the first-quarter 2025 debt issuances.
Current wording
At June 30, 2025, the balance sheet remained strong with financial flexibility to support and invest in the business. Cash and cash equivalents, restricted cash and marketable securities at June 30, 2025 of $15.5 billion increased $0.7 billion from December 31, 2024 and debt of $64.2 billion at June 30, 2025 increased $9.2 billion, primarily driven by the first-quarter 2025 debt issuances.
Previous wording
Total assets increased $8.5 billion ($7.2 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in goodwill and intangible assets mainly related to the HashiCorp acquisition. Total liabilities increased $8.9 billion ($7.3 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in debt and deferred income; partially offset by decreases in tax liabilities and accounts payable. Total equity of $27.0 billion decreased $0.4 billion from December 31, 2024 primarily driven by dividends paid; partially offset by first-quarter 2025 net income.
Current wording
Total assets increased $11.4 billion ($7.4 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in goodwill and intangible assets mainly related to the HashiCorp acquisition. Total liabilities increased $11.2 billion ($6.4 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in debt and deferred income; partially offset by a decrease in taxes payable. Total equity of $27.6 billion increased $0.2 billion from December 31, 2024 primarily driven by first-half 2025 net income and common stock; partially offset by dividends paid and an increase in accumulated other comprehensive loss.
Previous wording
Cash provided by operating activities was $4.4 billion in the first quarter of 2025, an increase of $0.2 billion compared to the first quarter of 2024 and free cash flow was $2.0 billion, an increase of $0.1 billion versus the prior-year period. Refer to page 59 for additional information on free cash flow. Net cash used in investing activities of $13.0 billion increased $8.8 billion compared to the prior-year period primarily driven by cash used for the HashiCorp acquisition. Financing activities were a net source of cash of $5.4 billion in the first three months of 2025 and increased $3.6 billion compared to the prior-year period primarily driven by higher net debt issuances in the current-year period.
Current wording
Cash provided by operating activities was $6.1 billion in the firstsix months of 2025, a decrease of $0.2 billion compared to the first six months of 2024 which includes a decrease in cash provided by financing receivables of $0.3 billion. Free cash flow was $4.8 billion, an increase of $0.3 billion versus the prior-year period. Refer to page 75 for additional information on free cash flow. Net cash used in investing activities of $11.3 billion increased $9.3 billion compared to the prior-year period primarily driven by cash used for the HashiCorp acquisition. Financing activities were a net source of cash of $2.6 billion in the first six months of 2025 as compared to a use of cash of $2.6 billion inthe prior-year period primarily driven by debt.
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The following tables present each reportable segment’s revenue and gross margin results, followed by an analysis of the first three months of 2025 versus the first three months of 2024 reportable segments results. The reported revenue categories within our Software and Consulting reportable segments are reported on a comparable basis for all periods.
Current wording
The following tables present each reportable segment’s revenue and gross margin results, followed by an analysis of the second quarter and first six months of 2025 versus the second quarter and first six months of 2024 reportable segments results. The reported revenue categories within our Software and Consulting reportable segments are reported on a comparable basis for all periods.
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Revenue performance by line of business in the first quarter compared to the prior-year period was as follows:
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Revenue performance by line of business in the second quarter compared to the prior-year period was as follows:
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Across Software, our annual recurring revenue (ARR) was $21.7 billion, which increased 9.2 percent as reported (10.9 percent adjusted for currency). In the first quarter of 2025, the ARR calculation was updated to include all recurring revenue within the Software segment. ARR is a key performance metric management uses to assess the health and growth trajectory of our Software segment, and is calculated by using the current quarter’s recurring revenue and then multiplying that value by four. ARR includes annualized March 2025 HashiCorp recurring revenue. This value includes the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as-a-service arrangements such as SaaS and PaaS, and (3) maintenance and support contracts. ARR should be viewed independently of software revenue as this performance metric and its inputs may not represent revenue that will be recognized in future periods.
Current wording
Across Software, our annual recurring revenue (ARR) was $22.7 billion, which increased 12.2 percent as reported (10.4 percent adjusted for currency). In the first quarter of 2025, the ARR calculation was updated to include all recurring revenue within the Software segment. ARR is a key performance metric management uses to assess the health and growth trajectory of our Software segment, and is calculated by using the current quarter’s recurring revenue and then multiplying that value by four. This value includes the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as-a-service arrangements such as SaaS and PaaS, and (3) maintenance and support contracts. ARR should be viewed independently of software revenue as this performance metric and its inputs may not represent revenue that will be recognized in future periods.
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In the first quarter of 2025, Consulting gross profit margin of 27.3 percent increased 1.9 points on a year-to-year basis. Segment profit of $558 million increased 31.6 percent and segment profit margin of 11.0 percent increased 2.8 points year to year. The gross profit margin expansion and increase in segment profit and margin reflect the benefits from the productivity actions we have taken.
Current wording
In the second quarter of 2025, Consulting gross profit margin of 27.5 percent increased 1.2 points on a year-to-year basis. Segment profit of $562 million increased 21.3 percent and segment profit margin of 10.6 percent increased 1.6 points year to year.
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In the first quarter of 2025, Consulting signings decreased 10.5 percent as reported and 9.5 percent adjusted for currency compared to the prior-year period. However, we had solid growth in backlog during the quarter. The uncertainty within the current macroeconomic environment is impacting client spending, particularly on more discretionary projects, and is elongating the decision-making process on large, higher value projects. Clients also continue to reprioritize their IT budgets to prepare for investments in generative AI. Our book-to-bill ratio for the trailing twelve-months was over 1.15. Book-to-bill represents the ratio of IBM Consulting signings to its revenue over the same period. The metric is a useful indicator of the demand of our business over time.
Current wording
For the three and six months ended June 30, 2025, Consulting signings decreased 15.6 percent as reported (18.2 percent adjusted for currency) and 13.1 percent as reported (13.9 percent adjusted for currency), respectively, as clients continued to delay decision-making, especially in discretionary projects. However, we had continued growth in backlog in the second quarter despite the challenging pricing environment. Our book-to-bill ratio for the trailing twelve-months was over 1.14. Book-to-bill represents the ratio of IBM Consulting signings to its revenue over the same period. The metric is a useful indicator of the demand of our business over time.
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Refer to pages 60 through 61 for a discussion of Financing’s segment results.
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Refer to pages 76 through 77 for a discussion of Financing’s segment results.
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(1)2024 includes a pre-tax gain of $241 million from the divestiture of The Weather Company assets.
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(1)2024 includes a pre-tax gain of $239 million from the divestiture of The Weather Company assets.
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Total selling, general and administrative (SG&A) expense decreased 1.8 percent in the first quarter of 2025 versus the prior-year period driven primarily by the following factors:
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Total selling, general and administrative (SG&A) expense increased 1.8 percent in the second quarter of 2025 versus the prior-year period driven primarily by the following factors:
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•Higher operating expenses from acquired businesses (2 points); and
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•Higher operating expenses from acquired businesses, as a result of our continued investment to drive our hybrid cloud and AI strategy (5 points);
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•The effects of currency (1 point); partially offset by
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•The effects of currency (1 point); and
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•Lower spending reflecting the benefits from productivity actions focused on transforming our enterprise operations (4 points);
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•Lower spending reflecting the benefits from productivity actions focused on transforming our enterprise operations (6 points).
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Total expense and other (income) increased 3.1 percent in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by the prior-year gain on the divestiture of The Weather Company assets, higher current year spending, including expenses of acquired businesses, continued investments in portfolio innovation to drive our strategy, and higher acquisition-related charges and amortization of acquired intangible assets. These increases were partially offset by the benefits from productivity and the actions taken to transform our operations, the effects of currency, lower non-operating retirement-related cost and lower workforce rebalancing charges. Total operating (non-GAAP) expense and other (income) increased 3.8 percent year to year, driven primarily by the factors described above, excluding the impacts from non-operating retirement-related costs, acquisition-related charges and amortization of acquired intangible assets.
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•Benefits from productivity and the actions taken to transform our operations (5 points); and
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•Lower workforce rebalancing charges (1 point); and
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•Lower workforce rebalancing charges (1 point).
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Operating (non-GAAP) SG&A expense decreased 3.7 percent year to year primarily driven by the same factors above, excluding the higher acquisition-related charges and amortization of acquired intangible assets.
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Operating (non-GAAP) SG&A expense decreased (1.6) percent year to year primarily driven by the same factors above, excluding the higher acquisition-related charges and amortization of acquired intangible assets.
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Expected credit loss expense was a provision of $14 million in the first quarter of 2025 compared to a benefit of $23 million in the prior-year period. The year-to-year change was primarily driven by higher unallocated reserve requirements in the current year as a result of the current economic conditions. Refer to “Receivables and Allowances” section on page 54 for additional information.
Current wording
Expected credit loss expense was a provision of $28 million in the first six months of 2025 compared to a benefit of $21 million in the prior-year period. The year-to-year change was primarily driven by higher unallocated reserve requirements in the current year as a result of the current economic conditions. Refer to "Receivables and Allowances" section on page 70 for additional information.
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Research and development (R&D) expense and operating (non-GAAP) R&D expense, increased 8.6 percent and 8.3 percent, respectively, in the first quarter of 2025. The year-to-year increase in R&D expense was primarily driven by investments to drive innovation in AI, hybrid cloud and quantum; partially offset by the effects of currency (1 point).
Current wording
Research and development (R&D) expense increased 13.9 percent year to year in the second quarter. The year-to-year increase in R&D expense was primarily driven by investments to drive innovation in AI, hybrid cloud and quantum and higher operating acquisition-related spending.
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Total intellectual property and custom development income increased 16.9 percent year to year. The increase was primarily driven by joint development and licensing agreements with a Japanese consortium to leverage our intellectual property and expertise on advanced semiconductors.
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Total intellectual property and custom development income decreased 11.0 percent year to year in the second quarter, and increased 2.2 percent in the first six months of 2025 compared to the prior-year period. The increase in the first six months of 2025 was primarily driven by joint development and licensing agreements with a Japanese consortium to leverage our intellectual property and expertise on advanced semiconductors.
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•Lower non-operating retirement-related cost of $73 million. Refer to “Retirement-Related Plans” for additional information.
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•Lower non-operating retirement-related costs of $73 million. Refer to "Retirement-Related Plans" for additional information.
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Operating (non-GAAP) other (income) and expense was income of $187 million in the first quarter of 2025 and decreased $276 million compared to the prior-year period. The year-to-year change was primarily driven by the factors described above, excluding the lower non-operating retirement related costs and the acquisition-related charges.
Current wording
Operating (non-GAAP) other (income) and expense was income of $65 million in the second quarter of 2025 and decreased $283 million compared to the prior-year period. The year-to-year change was primarily driven by the factors described above excluding lower non-operating retirement-related costs.
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•Lower gains on divestitures of $244 million, primarily driven by the divestiture of The Weather Company assets in the first-quarter 2024 (included in “Other” in the table above); partially offset by
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•Lower gains on divestitures of $252 million primarily driven by the divestiture of The Weather Company assets in first-quarter 2024 (included in "Other" in the table above); and
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Interest expense of $455 million in the first quarter of 2025 increased $23 million compared to the prior-year period. Interest expense is presented in cost of financing in the Consolidated Income Statement if the related external borrowings are to support the Financing external business. Overall interest expense (excluding capitalized interest) for the first quarter of 2025 was $542 million, an increase of $25 million year to year primarily driven by higher average interest rates in the current year.
Current wording
Interest expense increased $82 million and $106 million year to year in the second quarter and first six months of 2025, respectively. Interest expense is presented in cost of financing in the Consolidated Income Statement if the related external borrowings are to support the Financing external business. Overall interest expense (excluding capitalized interest) for the second quarter and first six months of 2025 was $595 million and $1,138 million, respectively, an increase of $87 million and $112 million, respectively, compared to the prior-year periods. The year-to-year dynamics for both the second quarter and first six months of 2025 were primarily driven by higher average interest rates and a higher average debt balance in the current year.
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Total pre-tax retirement-related plan cost decreased by $88 million compared to the first quarter of 2024, primarily driven by a decrease in recognized actuarial losses ($107 million), and lower interest costs ($82 million), partially offset by lower expected return on plan assets ($116 million).
Current wording
Total pre-tax retirement-related plan cost in the second quarter of 2025 decreased by $70 million compared to the second quarter of 2024, primarily driven by a decrease in recognized actuarial losses ($99 million) and lower interest cost ($62 million), partially offset by lower expected return on plan assets ($88 million). Total cost for the first six months of 2025 decreased by $157 million compared to the first six months of 2024, primarily driven by a decrease in recognized actuarial losses ($206 million) and lower interest cost ($144 million), partially offset by lower expected return on plan assets ($203 million).
Previous wording
As described in the “Operating (non-GAAP) Earnings” section, management characterizes certain retirement-related costs as operating and others as non-operating. Utilizing this characterization, operating retirement-related costs in the first quarter of 2025 were $243 million, a decrease of $14 million compared to the first quarter of 2024. The decrease was primarily driven by lower service cost ($13 million). Non-operating costs/(income) was $23 million of cost in the first quarter of 2025 compared to $96 million in the prior-year period.
Current wording
As described in the “Operating (non-GAAP) Earnings” section, management characterizes certain retirement-related costs as operating and others as non-operating. Utilizing this characterization, operating retirement-related costs in the second quarter of 2025 were $255 million, an increase of $3 million compared to the second quarter of 2024. The increase was primarily driven by increased cost of defined contribution plans ($11 million), partially offset by lower service cost ($8 million). For the first six months of 2025, operating retirement-related costs were $499 million, a decrease of $11 million compared to the prior-year period, primarily driven by lower service cost ($21 million) partially offset by increased cost of defined contribution plans ($10 million). Non-operating costs/(income) was $25 million of cost in the second quarter of 2025 compared to $98 million in the prior-year period, and $48 million for the first six months of 2025 compared to $194 million in the prior-year period. For the periods presented, the year-to-year decreases in recognized actuarial losses and interest cost, and lower expected return on plan assets were primarily driven by the prior year U.S. and
Previous wording
The year-to-year decrease in recognized actuarial losses was primarily driven by the prior year U.S. and Canada pension transfers which accelerated the recognition of actuarial losses in the second half of 2024. Refer to note U, “Retirement-Related Benefits,” in our 2024 Annual Report for additional information.
Current wording
Canada pension transfers which occurred in the second half of 2024. Refer to note U, “Retirement-Related Benefits,” in our 2024 Annual Report for additional information.
Previous wording
The continuing operations provision for income taxes in the first quarter of 2025 was $103 million, compared to a benefit from income taxes of $502 million in the first quarter of 2024. The prior-year tax benefit was primarily driven by the resolution of certain tax audit matters. The operating (non-GAAP) provision for income taxes in the first quarter of 2025 was $221 million, compared to $94 million in the first quarter of 2024. The operating (non-GAAP) income tax provision year-to-year change was primarily driven by the same factor described above.
Current wording
The continuing operations provision for income taxes for the first six months of 2025 was $507 million, compared to a benefit from income taxes of $112 million for the first six months of 2024. The benefit from income taxes in the first six months of 2024 was primarily driven by the resolution of certain tax audit matters in the first quarter. The operating (non-GAAP) provision for income taxes in the first six months of 2025 was $766 million, compared to $610 million in the first six months of 2024. The operating (non-GAAP) income tax provision year-to-year change was primarily driven by the same factor described above.
Previous wording
The amount of unrecognized tax benefits at March 31, 2025 is $8,905 million which can be reduced by $617 million associated with timing adjustments, potential transfer pricing adjustments, and state income taxes. The net amount of $8,288 million, if recognized, would favorably affect the company’s effective tax rate.
Current wording
The amount of unrecognized tax benefits at June 30, 2025 is $9,192 million which can be reduced by $664 million associated with timing adjustments, potential transfer pricing adjustments, and state income taxes. The net amount of $8,528 million, if recognized, would favorably affect the company’s effective tax rate.
Previous wording
Cash and cash equivalents, restricted cash and marketable securities at March 31, 2025 were $17,592 million, an increase of $2,788 million compared to December 31, 2024. Total debt of $63,284 million at March 31, 2025 increased $8,311 million compared to December 31, 2024 primarily driven by the first-quarter 2025 debt issuances to increase our financial liquidity and plan for our future debt maturities. We continue to manage our debt levels while being acquisitive and without sacrificing investments in our business.
Current wording
Cash and cash equivalents, restricted cash and marketable securities at June 30, 2025 were $15,530 million, an increase of $726 million compared to December 31, 2024. Total debt of $64,165 million at June 30, 2025 increased $9,192 million compared to December 31, 2024, primarily driven by the first-quarter 2025 debt issuances to increase our financial liquidity and plan for our future debt maturities, and due to currency fluctuation. We continue to manage our debt levels while being acquisitive and without sacrificing investments in our business.
Showing the first 40 of 70 pairs. Open the source sections for the rest.
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Current report — wording carried from elsewhere
The following table provides the company’s operating (non-GAAP) earnings for the first six months of 2025 and 2024.
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(1)Refer to page 79 for a more detailed reconciliation of net income to operating earnings.
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Geographic revenue performance for the six months ended June 30, 2025:
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•Higher amortization of acquired intangible assets and acquisition-related charges (1 point); partially offset by
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Operating (non-GAAP) SG&A expense increased 0.6 percent year to year primarily driven by the same factors above, excluding the higher amortization of acquired intangible assets and acquisition-related charges.
Current report — wording carried from elsewhere
Expected credit loss expense was a provision of $14 million in the second quarter of 2025 compared to $2 million in the prior-year period. The year-to-year change was primarily driven by higher specific reserve requirements in the current-year period. Refer to “Receivables and Allowances” section on page 70 for additional information.
Current report — wording carried from elsewhere
Research and development (R&D) expense and operating (non-GAAP) R&D expense increased 11.3 percent and 11.2 percent, respectively, in the first six months of 2025 primarily driven by the same factors above.
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•Higher net exchange losses (including derivative instruments) of $171 million in the current-year period; and
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•Higher net exchange losses (including derivative instruments) of $91 million; and
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“Balance Sheet and Return on Equity Highlights” on page 76 for additional details regarding the Financing segment receivables and allowances.
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(1)The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income.
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Previous report — wording carried elsewhere
(2)2024 benefit from income taxes due to the resolution of certain tax audit matters.